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Mind Over Money: Does Salary Transparency Affect Job Satisfaction?

Should you let your employees know how much you pay their co-workers?

With news that its employees’ paychecks are not kept private, Whole Foods just joined a growing list of companies that embrace greater transparency by making their employees’ salaries public. As more companies implement this practice, you might be asking yourself, “Is salary transparency a good idea?” The jury is still out as to whether the pros outweigh the cons, however.

Not too long ago, the University of California, Berkley released a study investigating whether learning about colleagues’ salaries increases or decreases job satisfaction. The researchers selected a random group of faculty and staff from the University of California and provided the link to the website where they could learn about their co-workers’ salaries. The researchers then surveyed those who received this information and those who did not.

So what did they learn? A few things, actually…

  1. Employees are really interested in the pay of their co-workers. Many of those who received the information went straight to the website to check out their co-workers’ salaries.
  2. Providing information about co-workers’ pay did not have much of an impact on the job satisfaction of the average worker.
  3. Employees who are paid less than average became less happy with their jobs and more likely to look for another job once they learned about their co-workers’ salaries.
  4. Employees who are paid more than average did not change their level of job satisfaction once they learned about their co-workers’ salaries.

What are we to conclude from this? These findings indicate that making salaries public may have more drawbacks than benefits. Basically, highly paid employees will not be made any happier, while lower paid employees will experience a decrease in job satisfaction and loyalty to the employer.

Tell us: Does your organization make compensation public? Why or why not?

Ioana Marinescu

About Ioana Marinescu

Ioana Marinescu is an assistant professor in economics at the University of Chicago Harris School of Public Policy. Her research focuses on understanding labor markets. She has been collaborating on data and research projects with CareerBuilder and she is especially interested in how to get the right people to work in the right jobs. You can follow her on twitter @mioana and check out her research on her website, marinescu.eu.
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